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Natural Gas Price Fundamental Daily Forecast – Lower as Traders Shrug Off Friendly EIA Storage Report

On Thursday, the U.S. Energy Information Administration reported that domestic supplies of natural gas rose by 81 billion cubic feet last week.
James Hyerczyk
Natural Gas

Natural gas futures are edging lower on Friday but still holding above a pair of major bottoms at $1.822 and $1.802. There was little follow-through to the downside after Thursday’s sharp break. Yesterday’s sell-off came as a surprise since the weekly government storage report came in on the low end of estimates.

On Friday, July natural gas futures are trading $1.850, down $0.002 or -0.11%.

Spot gas prices also moved lower across the country on Thursday amid a lack of widespread heat. Natural Gas Intelligence’s National Average dropped 15.0 cents to $1.540.

With summer heat not expected to show up for another month, traders were watching yesterday’s government report to see the impact of the recent cold weather shock in the North. However, the numbers came in nearly as expected, encouraging disappointed bullish traders to liquidate their speculative positions.

US Energy Information Administration Weekly Storage Report

On Thursday, the U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas rose by 81 billion cubic feet for the week-ended May 15. That figure matched the average increase forecasted by analysts polled by S&P Global Platts.

Total stocks now stand at 2.503 trillion cubic feet, up 779 billion cubic feet from a year ago, and 407 billion cubic feet above the five-year average, the government said.

Natural Gas Intelligence (NGI) reported that Bespoke Weather Services, which had projected an 85 Bcf injection, said it wasn’t reading much into the latest EIA figures despite the miss, as it was a “very heavy” heating degree day week and marked the end of any possible influence of heating demand.

“It does represent a little balance improvement, but far more important will be the trend in the next few EIA numbers, as this week’s data has shown some demand coming,” Bespoke said. “Low global prices keep concern alive for further liquefied natural gas slowdowns, however.”

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Short-Term Weather Outlook

According to NatGasWeather for May 22 to May 28, “A stalled weather system remains across the east-central US with showers and thunderstorms, although rather comfortable highs of upper 60s and 70s. A second system is bringing showers to the Northwest with slightly cool highs of 50s and 60s. Over the central US and Texas, high pressure is resulting in very warm to hot highs of 80s and 90s. This weekend into next week will bring near ideal temperatures of 70s and 80s across the northern US, while warm over the South and Southeast U.S. with 80s to lower 90s. Heat will build over California and the Southwest with highs of 90s and 100s for locally strong demand, while mostly light elsewhere.”

Daily Forecast

Other than profit-taking or short-covering ahead of the week-end, traders don’t have a huge incentive to buy at this time. The bullish production news that drove prices sharply higher on Monday, seem to have gone away. Meanwhile, bullish traders are still waiting for the demand from the easing of coronavirus restrictions to kick in. Traders are also waiting to see the La Nina pattern that could determine whether the summer will be hotter than usual.

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